Everything You Need To Know About Student Loan Repayments

Going to university in the UK is an exciting time of your life. But it’s also an expensive one. Student loans are unlikely to cover all your expenses so you may need to work alongside studying. And while it may feel like student loan repayments are a long while off, they’ll (hopefully) come around quicker than you think.

When you leave university you may not be paying back your loans straight away. But one day you’ll start to see it coming out of your wages. Navigating repayments can be daunting if you’re unsure when repayments start, how they’re calculated and how to manage them.

When do student loan repayments start?

For most UK graduates repayments start the April after you leave your course, provided you’re earning over a certain threshold. The earning threshold depends on your loan plan type:

• Plan 1 loans: For students who started their course before September 2012, repayments start when you earn above £24,990 a year (£2,082 a month).
• Plan 2 loans: For students who started their course on or after September 2012, repayments start when you earn over £27,295 per year (£2,274 a month).
• Plan 4 loans: For Scottish students who took out loans after April 2021, repayments start when you earn over £31,395 a year (£2,616 a month).
• Plan 5 loans: For students who started their course on or after 1st August 2023, repayments start when you earn over £25,000 a year (£2,083 a month).
• Postgraduate loans: Repayments start when you earn above £21,000 (£1,750 a month).

How are repayments calculated?

Repayments are calculated based on your income, and not the amount on borrowed.

For those on plan 1, 2 or 4 you pay 9% of your income above the threshold. And for those on postgraduate loans you pay 6% of your income above the threshold.

For example if you are on Plan 1 and you earn £33,000 a year your annual repayment will be £668 or just over £60 a month. This is because you pay back 9% of £8,010 (the amount above the threshold).

If you’re self-employed than then HMRC will work out how much you repay each year when you submit your tax form. So remember to keep aside the money for your student loan repayment if this applies to you.

Interest rates on student loan repayments

Interest on student loans is applied from the moment you get your first payment. This continues until your loan is repaid or written off.

Currently interest rates sit at:

• 6.25% if you’re on Plan 1
• 7.9% if you’re on Plan 2
• 6.25% if you’re on Plan 4
• 7.9% if you’re on a Postgraduate loan.

If your income goes over the monthly threshold due to a bonus or overtime you’ll make a repayment. But you can ask for a refund at the end of the tax year if your annual income is less then the threshold for your plan.

When your student loan gets written off or cancelled

Student loans in the UK are written off after a certain period if they have not been fully repaid. The time-period depends on your loan plan.

• Plan 1 Loans: If you had your first loan on or before 1st September 2006 then it’s when you turn 65. If you had your first loan on or after that date it will be written off 25 years after the April you were first due to repay.
• Plan 2 Loans: Written off 30 years after the April you were first due to repay.
• Plan 4 Loans: The loans will be written off when you’re 65, or 30 years after the April you were first due to repay – whichever comes first.
• Plan 5 loans: Written off 40 years after the April you were first due to repay.
• Postgraduate Loans: Written off 30 years after the April you were first due to repa

Things to note about your loan

Check the loan plan you’re on

You can check which plan you’re on by signing in to your online account. There you can download your ‘active plan type letter’. Make sure this matches the plan your employer has you on. If they’re different then show your plan letter to your employer who can update your payroll details.

You can get a refund if you paid back too much of your loan because you were on the wrong plan type.

Overpayments

There’s no penalty for paying all or some of your loan off early. So if you can afford to, consider making overpayments to pay off your loan quicker and reduce interest. But before you do this consider if the money can work harder elsewhere. For example if you have other debt then chances are the interest rates are higher so you can use it there.

Having a student loan won’t affect your credit rating or ability to get a mortgage or other forms of credit.

If you have more than one loan

If you have both a postgraduate and undergraduate loan then you’ll be paying both back together, This works out at 6% of your income over the £21,000 threshold and 9% of your income over the lowest threshold for the other types of plans.

For example if you have a Plan 2 loan and a postgraduate loan and earn £28,800 a year (or £2,400 a month) you’ll pay back some of both loans. This works out at £39 a month for your postgraduate loan (6% of the £650 over the threshold for the postgraduate loan). Then you’ll pay £11 a month for your plan 2 loan (9% of the £126 over the threshold per month). So in total you’ll pay £50 a month.

If you have more than one job

You’ll only make repayments from jobs where that play is over the threshold and not your combined income.

So if you’re on a Plan 2 loan and one job pays £2,300 a month and one £500 a month you’ll only make repayments on the first job because it’s over the threshold.

If you leave the UK for more than three months

If you’re going travelling or moving abroad you need to update your employment details and get the Student Loans Company know. You’ll continue to repay your loan unless you provide evidence that your income is below the threshold. This could build up arrears on your account.

If you work abroad there are different repayment thresholds for each country.

When you’re back in the UK you must update your details again. This ensures you’re not paying more than you need to, or being charged a higher level of interest.

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